BMW Group AG (BMWYY) shares tumbled Wednesday after the luxury carmaker warned of a "significant decline" in 2019 profits and unveiled a $13.6 billion cost-cutting program.
The carmaker said international trade conflicts, rising manufacturing costs and new emissions regulators would all weigh on 2019 profits, forcing it to accelerate a cost-cutting plan that will save the group around €12 billion ($13.6 billion) by 2022. BMW posted full-year pre-tax earnings of €9.12 billion last week, down 7.9% from 2017, thanks in part to currency headwinds and accelerated investments in electric vehicles.
"Our industry is witnessing rapid transformation. In this environment, a sustained high level of profitability is crucial if we are to continue driving change," said BMW board member Nicolas Peter. "In view of the numerous additional factors negatively impacting earnings, we began to introduce countermeasures at an early stage and have taken a number of far-reaching decisions."
"Discipline and a clear focus on rigorous implementation are essential as we aim to emerge from these challenging times stronger than ever," he added.
BMW shares were marked 5.35% lower on the trading session in Frankfurt following the fresh profit warning and changing hands at €71.67 each, a move trims the stock's year-to-date gain to just under 3%.
Domestic rivals Volkswagen AG (VLKAY) and Daimler AG (DMLRY) were also pulled lower on the BMW profit warning, falling around 2% each by mid-day in Frankfurt, as the DAX performance index slumped 1.1%.
The region-wide Stoxx 600 Automobiles and Parts index was marked 1.9% lower at 495.85 points, but has risen some 15.3% so far this year despite the ongoing concern over potential tariffs on European cars sold in the United States.
President Donald Trump has received a report from the Commerce Department last month that assessed their risk to national security; the President will have until last May to review the report and make a decision.
"If we don't make the deal we'll do the tariffs," Trump told reporters at the White House following receipt of the report. "We're trying to make a deal. They're very tough to make a deal with, the EU."
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